Management Turnover as Change Agent

Monday, April 7, 2014

Good News - Executive Turnover Begins to Grow

Executive turnover is finally beginning to show signs of growth again, a positive sign for the North American economy.  The last number of months executive turnover was rather slow in comparison to a year earlier but we are beginning to see signs of a slight growth in turnover among the executive ranks.  The increase in executive turnover seems to correlate with the latest more positive news regarding job growth in the Amercican economy.  Earlier on Friday morning April 4, the U.S. Department of Labor Bureau of Labor Statistics (BLS) announced  March employment Report and as expected the numbers were reasonably positive.  According to the BLS Report,

Total nonfarm payroll employment rose by 192,000 in March, and the unemployment rate
was unchanged at 6.7 percent, the U.S. Bureau of Labor Statistics reported today.
Employment grew in professional and business services, in health care, and in mining
and logging.

Earlier in the same week ADP released it latest Employment Report and the job growth numbers were greater than anticipated. According to the ADP Employment Report released April 2,

Private-sector employment increased by 191,000 from February to March, on a seasonally adjusted basis.


    • Small businesses (1-49 employees) +72,000
    • Medium businesses (50-499 employees) +52,000
    • Large businesses (500 or more employees) +67,000

Mark Zandi, chief economist of Moody’s Analytics, said, "The job market is coming out from its 
deep winter slumber. Job gains are consistent with the pace prior to the brutal winter. The gains 
are broad based across industries and business size classes. Even better numbers are likely in 
coming months as the weather warms.

The American economy appears to have turned the corner but is still far from out of the woods.  With winter beginning to fade the economy seems to be percolating.  Unemployment continues to slowly decline and job growth is starting to show real incremental improvement.  Top executives in both small and large firms also find themselves in a similar situation.  Opportunities are growing for top executives and at the same time underperforming firms are now more likely to change deck chairs as the overall economy shows improved signs of life.  Liberum Research expects to see increased turnover in the executive ranks as we move through the Spring and into the Summer.  
Liberum has put together below a six plus year quarterly breakdown of executive turnover totals for CEOs, CFOs and C-level executives covering North America. Most of the below quarterly numbers showed continuing declines until the second quarter of 2011.  At this point, the numbers began to reverse themselves.  Turnover at the executive levels of corporate America began to grow but not consistently.  
Below is a simple table outlining the quarterly turnover totals as registered through Liberum Research's Management Change Database for 2008 through the first quarter of 2014 for CEO, CFO and overall C-level turnover.  

 Total CEO Turnover Comparisons   
 Year 2008    2009 2010 2011 2012 2013 2014   
1st Quarter 745491 388346 680 583 500 
 2nd Quarter596 380321 581665 619  
 3rd Quarter533409298713 636 627 
 4th Quarter461430328697 673 636 
 Annual Total2,3351,7101,3352,337 2,6542,465 500 
 Total CFO Turnover Comparisons 
 Year 2008    2009 2010 2011 2012 2013 2014   
1st Quarter 593 332 296 280 640 495  468
 2nd Quarter551 326 273 404612 557  
 3rd Quarter438 279 256629 598582  
 4th Quarter364 313  258   476569562  
 Annual Total1,9461,250 1,0831,789 2,4192196 468 
 Total C-level Turnover Comparisons
 Year 2008    2009 2010 2011 2012 2013  2014   
1st Quarter 6735 4061 34532863 5442 3971 4083 
 2nd Quarter7430 5051 3199 404150364102  
 3rd Quarter4865 3690 25225349 42354123 
 4th Quarter4277 3439  2381   4596 41974196 
 Annual Total23,307 16,241 11,55516,849 18,91016,392 4,083 

As you can see from the quarterly and annual executive turnover totals in the above chart, North American public companies are operating at a more consistent level with regard to turnover.   The same is true when viewed from a brief monthly perspective. March 2014's executive turnover totals remained reasonably high in the key categories.  Liberum anticipates this trend will continue as we move through the Spring and Summer months.  

The latest monthly comparison figures with regard to executive turnover for March 2014 with those of March 2013 and February 2014 and March 2014 are as follows:  
  • CEO turnover for March 2014 declined 7% from that of March 2013, whereas CFO, C-level and Board of Director turnover all increased 22%, 9% and 9%, respectively.  
  • The the month to month change from February 2014 to March 2014 showed a small decline of 2% for CEOs, an increase of 13% for CFOs and an increase of 6% with regard to C-level changes and an increase of 16% for Board of Director changes.  Overall these totals remain positive signs for the economy.    
In the below report, Liberum has focused on fifty seven CEO changes of special significance for the month of March out of a total of only 164. We have also put together the overall turnover figures for the month of March 2014.  The below information is just illustrative of how investors could view executive turnover and its possible relationship with a company's performance. The same could be done for COOs, Presidents, Chairmans etc. just through the Liberum database.

03-03 I.DOBB. Systems, Inc.  IDSY  NASDAQ  69
03-03 meemee Media Inc.  MEME  OTN  16
03-03 Vansen Pharma Inc.  VNSN  112
03-03 Xylem Inc. Common  XYL  NYSE
03-04 Oiltanking Partne  OILT  NYSE  2893
03-04 QUALCOMM Incorporated  QCOM  NASDAQ  129900
03-05 Comscore, Inc. SCOR  NASDAQ  1074  
03-05 Stallergenes  GENP  FRANCE EPA
03-05 Viking Minerals I  VKML  OTN
03-05 Wyndham Worldwide  WYN  NYSE
03-06 Vedanta Resources  VED.L  23
03-07 Canexus Corp  CXUSF  OTN  659
03-07 Plandel Resources  PLDX  56
03-10 Astika Holdings ASKH  OBB  8
03-10 Kresta Fpo  KRS  ASX  25
03-11 Synacor, Inc.  SYNC  NASDAQ  74
03-11 The Bon-Ton Stores, Inc.  BONT  NASDAQ  207
03-12 Advanced Content  ADCS  OTN
03-12 Akers Biosciences  AKER  NASDAQ  11
03-12 Covisint Corporation  COVS  NASDAQ  292
03-12 Eastman Kodak Company  EK  
03-12 Semgroup Corporat  SEMG  NYSE  2767
03-13 Apple Rush Co  APRU  OTN  5
03-13 Rotoblock Corp  RTBC  OTN  415
03-14 Business Cont Sol  BUCS  OTN  4
03-14 Centor Inc  CNTO  OTN  8
03-14 Chembio Diagnosti  CEMI  NASDAQ  32
03-14 Crumbs Bake Shop  CRMB  NASDAQ  8
03-14 Nokia Corporation (ADR)   NOK  NYSE  28214
03-14 SupportSoft, Inc.  SPRT  NASDAQ  151
03-14 Us Dataworks Inc  UDWK  OTN  2
03-17 Digital Realty Trust, Inc.  DLR  NYSE  6665
03-17 First Titan Corp  FTTN  OBB  5
03-17 Wayne Savings Bancshares, Inc  WAYN  NASDAQ  33
03-18 Nam Tai Electronics, Inc.  NTE  NYSE  271
03-18 Schmolz + Bicken  SSN  Germany
03-18 United Community Financial Corp UCFC  NASDAQ  197
03-19 Equity One, Inc.  EQY  NYSE  2637
03-20 Contravir Pharmac  CTRV  OBB  52
03-20 General Cable Corporation  BGC  NYSE  1376
03-20 Symantec Corporation  SYMC  NASDAQ  12923
03-20 Synta Pharmaceuticals Corp.  SNTA  NASDAQ  393
03-21 3d Eye Solutions,  TDEY  OTN  42
03-21 Pbs Holding, Inc.  PBHG  OTN  409
03-21 Zumiez Inc.  ZUMZ  NASDAQ  738
03-24 Catalyst Copper C  CCY  CANADA  836
03-25 Affiliated Managers Group, Inc.  AMG  NYSE  9873
03-25 Cantex Energycorp  CTXE  OTN  344
03-25 Double Eagle Petroleum Co.  DBLE  32
03-25 Gordmans Stores GMAN  NASDAQ  101
03-25 Omnicare, Inc.  OCR  NYSE  5859
03-27 Superior Industries Int'l Inc.  SUP  NYSE  546
03-27 Westmoreland Coal Company  WLB  NASDAQ  433
03-28 Hudson Valley Hol  HVB  NYSE  377
03-31 CDI Corp.  CDI  NYSE  334
03-31 Elbit Medical Imaging Ltd  EMITF  NASDAQ  6
03-31 Zoned Properties  ZDPY  OTN  10

> Drugs/Biotech 
- 144
> Banking  - 103
> Energy - 87

> Banking - 15
> Drugs/Biotech  - 15
> Metals/Mining - 14

> Drugs/Biotech - 17
> Metals/Mining - 14
> Banking - 12

> Drugs/Biotech - 72
> Energy - 38
> Banking - 32
Investors need to diligently monitor key management changes. Certain management changes should be viewed as a "special situation" that can have a direct and major impact on a company's performance and share price.
  • New CEOs know more than the market about the company.  Their decision to take the position contains information. Likewise the departing CEO. Likewise departing CFOs.
  • New CEOs will bring new skills and often-times a new direction.  This is normally significant, and worth analyzing.

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